Demutualization is the process by which a customer-owned mutual organization (mutual) or co-operative changes legal form to a joint stock company.[1] It is sometimes called stocking or privatization. As part of the demutualization process, members of a mutual usually receive a "windfall" payout, in the form of shares in the successor company, a cash payment, or a mixture of both. Mutualization or mutualisation is the opposite process, wherein a shareholder-owned company is converted into a mutual organization, typically through takeover by an existing mutual organization. Furthermore, re-mutualization depicts the process of aligning or refreshing the interest and objectives of the members of the mutual society.
The mutual traditionally raises capital from its customer members in order to provide services to them (for example building societies, where members' savings enable the provision of mortgages to members). It redistributes some profits to its members. By contrast, a joint stock company raises capital from its shareholders and other financial sources in order to provide services to its customers, with profits or assets distributed to equity or debt investors. In a mutual organization, therefore, the legal roles of customer and owner are united in one form ("members"), whereas in the joint stock company the roles are distinct. This allows a broader capital base if the customers cannot or will not provide sufficient financing to the organization. However, a joint stock company must also try to maximize the return for its owners instead of only maximizing the return and customer services to its customers. This can lead to a decline in customer service to the extent that customers', management's and shareholders' interests diverge.[2]
A very early example of demutualization were the changes to the structure of the Union Insurance Society of Canton initiated by its secretary N.J. Ede between 1873 and 1882 leading to its re-registration as a limited company having originated as a mutual assurance society for traders in Canton in 1835.
^"demutualization, n." Oxford English Dictionary (subscription). March 2004. Retrieved 2008-05-20.
^Shelagh Heffernan. "The Effect of UK Building Society Conversion on Pricing Behaviour (March 2003)" (PDF). Faculty of Finance, CASS Business School, City of London. Archived from the original (PDF) on 2007-11-29. Retrieved 2007-10-10.
organization might demutualize, full demutualization, sponsored demutualization, and into a mutual holding company (MHC). In any type of demutualization, insurance...
policyholders. The Mutual of Omaha Insurance Company has also investigated demutualization, even though its form of ownership is embedded in its name. It is noted...
Exchange Law. In 2002, Nagoya Stock Exchange, Inc. was established after demutualization of NSE. The Nagoya Stock Exchange is a stock corporation that provides...
government or state. Nationalization contrasts with privatization and with demutualization. When previously nationalized assets are privatized and subsequently...
Gains from demutualization — this example can lead to especially large windfall gains. A study in 1999 into the potential demutualization of the John...
American Life. In 1999, its voting eligible policyholders approved demutualization, and the shares of Manulife, the holding company of The Manufacturers...
in October 2018. BSE was demutualized and corporatized on 19 May 2007, pursuant to the BSE (Corporatization and Demutualization) Scheme, 2005 notified by...
previous nationalization. This type of privatization can include the demutualization of a mutual organization, cooperative, or public-private partnership...
hurricanes, and temperature. Chicago portal Commodity Exchange Act Demutualization List of futures exchanges List of traded commodities Securities market...
Despite its name, WaMu ceased being a mutual company in 1983 when it demutualized and became a public company on March 11. On June 30, 2008, WaMu had total...
three exchanges has completed the second phase of the Stock Exchanges Demutualization and Integration Act 2012, passed by a joint session of the Parliament...
carpetbaggers."[citation needed] Between 1997 and 2002, a group of pro-demutualization supporters, "Members for Conversion", operated a website, carpetbagger...
Prudential Insurance Company of America). Preceding Prudential Financial's demutualization, Prudential sold many of its real estate assets, for instance most...
holding companies are one way to undergo privatization, also called demutualization. Association Internationale de la Mutualité Oil Insurance Limited Algoma...
the Knesset passed the second and third readings of a law for TASE's demutualization, which created the outline for turning it into a for-profit company...
by its member stockbrokers. However, the major stock exchanges have demutualized, where the members sell their shares in an initial public offering. In...
was a federation of regional agricultural supply cooperatives. CF then demutualized, and became a publicly traded company. CF Industries operates nine manufacturing...
bought back €14,725,910.40 shares (€7.3 per share) as part of the demutualization. The bank also planned to recapitalize €1 billion in early 2016 (due...